Bullish on Stock - Request for Advice

not an optimal candidate I'd say it could gap down at any moment given history. The current low HV could mean a continued steady climb or a sudden spill..
 
Quote from pattersb:


I've discovered a stock that I am very bullish on. I'm planning to buy the underlying, but I'd like to maximize my profit potential through options contracts.

The technicals look super-fantastic, and it has weathered the last week unscathed.

It's failry lightly traded and trading at 64 and I think it has room to go higher ...

I'll buy call contracts, but I plan to risk more than usual. Any suggestions. I'd like to minimize risk/maximize profit.

wouldn't everybody ...
More...

If you are bullish and have no opinion on iv levels you can buy calls or sell puts. Generally you will want to buy(sell) atm or itm calls(puts) proportional to how many deltas you are comfortable being long.

Now, if you also have an opinion on volatility, you want to buy calls if you think vol is priced too low relative to your forward realized expectation of vol, and conversely sell puts if you think vols are 'overpriced' relative to blah,blah.

Since otm options will increase on a greater percentage basis for changes in vol, you will want to buy more otm calls equal to your desirable delta position.

There are many spread pos. to choose from. You might buy a call backspread where you sell a lower strike call and buy higher strike calls on a ratio to your desired deltas. You can buy a calendar spread, and a butterfly at a higher strike than where the underlying is currently trading. You could even sell a higher strike straddle, strangle(much to the chagrin of many posters here who may think its way too risky:D ). Conversly, you could buy a lower strike straddle, strangle than where the underlying is currently.

You can also do vertical call debit spreads, or vertical put credit spreads.


Endless possibilities and permutations.
 
You must log in or register to reply here.
Back
Top